When an increase in government spending leads to a decrease in private spending it is called

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Crowding out occurs when the government increases its spending, thereby increasing demand for goods and services. This increased demand may lead to higher prices and interest rates. As a result, private spending may decrease, as individuals and businesses struggle to afford the higher costs associated with borrowing and purchasing. This phenomenon is referred to as crowding out because it often results in a reduction in private sector activity.

When an Increase in Government Spending Leads to a Decrease